Verdict's in: Obama's $1 Trillion Stimulus Is a Bust

Friday, 02 Jul 2010 01:52 PM

By David A. Patten

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A new report showing a net loss of 125,000 jobs adds to the growing avalanche of evidence the $1 trillion stimulus has failed to boost the economy as promised, according to a chorus of economic experts.

Democrats had been planning to herald this as the Summer of Recovery, expecting a peak in stimulus spending. But the dreary economic news is contributing to a rising chorus of complaints from conservative economists that the stimulus spending binge has failed to deliver as promised.

"Yeah, I think we can say the stimulus was a bust," Stephen Moore, a Wall Street Journal editorial board member and the newspaper's senior economics writer, tells Newsmax. "The real problem is that the president has no plan B. We've had plan A, that was spend a trillion in stimulus. That didn't work. We've lost 2.2 million jobs since we started that spending, and all the president wants to do is add more stimulus. That's what's so disappointing."

Friday's Bureau of Labor Statistics report was a mixed bag. Unemployment dropped to 9.5 percent, but the dip was primarily because more people gave up looking for work. Although private employment rose, there was a 225,000 drop in jobs because of the loss of temporary census employment.

Perhaps most significantly, the private economy added 83,000 jobs — far below the projections of 115,000 to 125,000 jobs that many private analysts anticipated.

Some experts had estimated the economy would add up to 200,000 jobs. The disappointing numbers would be bad enough on their own, but instead they come in the context of a wealth of other indications that all is not well with the American economy.

Pending home sales took a record dive, with the National Association of Realtors' index of new home sales falling by 30 percent. The index now stands 16 percent below its May 2009 level. Housing starts dropped as well.

New-vehicle sales are also stalling. In June, auto sales dropped 11 percent from May, although they are up 14 percent from June of 2009. The stock market has been heading downhill as well.

Newsmax asked Allan Meltzer, an economics professor at Carnegie Mellon University and author of "A History of the Federal Reserve," to evaluate the effectiveness of the Obama stimulus.

Meltzer spoke bluntly Wednesday: "Hasn't worked. The economy is better than it was in January 2009 than when he took office. But the unemployment rate isn't.

"There are two major reasons why. His stimulus program was much more aimed at redistributing income than in creating wealth. And the second reason is he creates enormous uncertainty about the future, and uncertainty is the enemy of growth, of jobs, of employment," Meltzer said.

Harvard economics professor Jeffrey Miron, author of the new book "Libertarianism, From A to Z," says defenders of the stimulus are saying, "If we hadn't had the stimulus we would have had 10 or 12 percent unemployment, because the stimulus worked, and we need even more stimulus."

But Miron says it is clear the president's policies have generated uncertainty for the business community, and employment is not bouncing back as expected.

"The concern is this conventional spend-our-way-out of recession approach doesn't work, or doesn't work very well, and certainly not to the degree its proponents were claiming back in 2009," Miron tells Newsmax.

Increasingly, CEOs have begun complaining that the administration has been less than friendly to business.

The latest example: GE CEO Jeff Immelt, who Thursday charged "business did not like the U.S. president, and the president did not like business." A spokesman for Immelt later said those remarks, quoted in the Financial Times, were taken out of context.

"I don't think it's that surprising someone would say that," Miron tells Newsmax. "I don't think [President Obama] has indicated by his actions in office — separate from his rhetoric before holding office — that he's pro business. He says sort of condescending things about business, characterizing business as somehow evil for wanting to make profits. But from an economist's point of view, that's what business is supposed to be doing, making profits."

Miron says he shares the view that the president isn't particularly friendly toward businesses.

"What policy step has he proposed that could be considered pro-business?" Miron said. "Not a single one as far as I'm aware of."

Economists aren't the only ones who see the jobless report as more evidence the stimulus has turned out to be a trillion-dollar dud. Rep. Tom Price, R-Ga., released a statement calling for the president to halt "a campaign-style public relations tour" and take steps to bolster the private sector.

"If Democrats were truly focused on the economy, they would stop with the uncertainty and the job-killing agenda," Price said, adding: “Responsible leadership that respects the private sector would do wonders for our economy."

Fox News commentator and best-selling author Dick Morris recently gave the administration's handling of the economy a failing grade as well.

"Time after time since the start of the recession, Obama has used the crisis to expand the size and power of government — even when doing so would not only fail to solve the problem, but would worsen it," Morris said.

"It may be totally reasonable to say, 'Look the jury may not be 100 percent back in on spending to stimulate the economy,'" Miron says. "But the betting against it sure ought to be negative.

Moore sees an even bigger threat on the horizon: He says the administration is intentionally red-lining the nation's debt crisis to justify huge tax increases in the coming year. The Congressional Budget Office recently projected that the national debt will grow to 62 percent of the nation's economic output by year's end. Democrats have cited that grim news to call for higher taxes.

"That's exactly what Obama wants to do," Moore says. "That will cripple any recovery we might have. They've set up record deficits and now they want American taxpayers to pay for it… hopefully the Republicans won't go along."

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